Gold Junior Falco Resources A Prime Takeout Target

M&A Picking Up in Safe Jurisdictions

M&A activity is alive and well for gold companies in Ontario and Quebec. Earlier this week Goldcorp (GG) announced its intent to acquire Probe Mines (PROBFin an all stock deal that valued Probe at C$ 5.00/share or C$526 million. Probe's stock is currently trading at C$ 5.30/share, suggesting that investors think a higher bid could be coming. Other mid-tier and majors in the area include Barrick Gold (ABX), AuRico (AUQ), Hecla (HL), Yamana (AUY), Argonaut (ARNGF) , Iamgold (IAG), Agnico Eagle (AEM) and Osisko Gold Royalties (OKSKF). On January 21st, Osisko announced a C$200 million capital raise. Speaking about capital raises, gold company financings in Canada in just the past week include Lydian International (LYDIF) for C$16.5 million, Asanko Gold (AKG) for C$40 million, Primero Mining (PPP) C$75 million in convertible notes, Detour Gold (DRGDF), C$141 million, Richmont Mines (RIC), C$34 million and Romarco Minerals (RTRAF), C$300 million.

Increasingly, it appears that gold companies are stepping back from exotic locations in moderately to highly difficult jurisdictions to conduct business. Instead, North America is the place to be, especially in Canada. Osisko in particular making further acquisition(s) in Quebec makes sense. In November, 2014 Osisko acquired Virginia Mines' (VGMNF) Quebec property in an all stock deal valued at C$508 million. Is C$500 million the new sweet spot for Canadian gold company transactions? Given recent M&A activity, it's reasonable to look at other companies that could be compelling takeout targets.

Falco Resources Looking Especially Interesting

One such company is Falco Resources (FPC.V) / (OTC: FPRGF). With a market cap roughly 1/10 that of the two other recent deals, Falco is in many respects an ideal target. Falco is one of Quebec's largest mining claim holders with over 740 square kms of the former Noranda mining camp, including 14 former producing mines. The camp has historic gold production of 19 million ounces of gold and is the last Abitibi gold camp which is not controlled by a major gold producer. Falco boasts a maiden 43-101 Inferred resource, obtained largely from Noranda's historical data, containing 2.8 million gold equivalent ounces.

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Disclosure: I have no relationship with any company mentioned in this article. I own shares of Falco Resources. 

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